Summary
Despite Zillow’s exit from the iBuying market, Opendoor Technologies Inc.’s (OPEN) growth is not showing signs of slowing down.
In FQ3’21, OPEN reported revenues of $2.26B, with revenue guidance of $3.1B to $3.2B in FQ4’21. It will bring OPEN’s total revenue in FY2021 to a record high of $7.39B.
OPEN expects to deliver an end-to-end integrated experience for its consumers while continuing its nationwide expansion in FY2022.
We discuss whether investors should add OPEN stock now.
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mikulas1/E+ via Getty Images Investment Thesis
Opendoor Technologies Inc. ( OPEN ) is a US-based company that buys and sells residential properties through digital platforms and Machine Learning algorithms, also called iBuying. With the launch of integrated Opendoor Complete, homeowners can now: use self-service virtual home assessment for an instant price offer.
manage inspections with Opendoor Scout. (while OPEN manages internal repairs, pricing, and renovation scope from a centralized pool of vendors)
apply for loans from Opendoor Home Loans and Opendoor Backed Offers.
line up transaction dates to ease home moving, amongst others.
In November 2021, one of OPEN’s competitors, Zillow, exited the iBuying market while reporting massive losses and 17.9K unsold homes in its inventory. On the other hand, in FQ3’21, OPEN reported record-breaking revenues of $2.26B with 15.1K homes in its inventory. OPEN also guided revenues of $3.1B to $3.2B in FQ4’21, representing a potential increase of 141% QoQ.
We discuss whether investors should add OPEN stock now. OPEN Stands To Win As A Market Leader In iBuying As Zillow Exits The Industry
In November 2021, OPEN’s competitor, Zillow Group, Inc. ( Z ), exited the iBuying market with $569M of potential write-downs from its existing inventory. Zillow expects to sell the majority of its inventory in Dallas, Houston, Phoenix, Minneapolis, and Atlanta at a 5% to 7% loss per home. In addition, the company also agreed to sell 2K homes at market prices to Pretium Partners , a New York City-based investment firm. Pretium owns Front Yard Residential, one of the largest owners and operators of single-family rental properties with over 55K rental units.
Furthermore, Zillow reported $422M of losses from its iBuying segment in FQ3’21, representing more than 3 fold losses reported in H1’21. The losses were mainly attributed to the company’s failure in mastering the iBuying pricing algorithm, which resulted in higher buying prices than it can sell the homes. Back in 2020, Zillow expected the iBuying segment to be a significant revenue driver , with the lofty aim of reporting $20B annual revenue by FY2024. Rich Barton, the CEO of Zillow, said: We had been willing to take a really big swing on this, but not a bet-the-company swing… Fundamentally, we have been unable to predict future pricing of homes to a level of accuracy that makes this a safe business to be in. ( Insider ) Nonetheless, OPEN does not seem to be experiencing the same headwinds as its competitor, due to its robust Machine Learning algorithms and seven-year experience in the iBuying industry. OPEN reported record revenues in FQ3’21 with another stellar guidance for FQ4’21. As a result, OPEN stands to gain an even larger market share in the iBuying industry from Zillow’s exit. Furthermore, there are opportunities for OPEN to purchase Zillow’s existing and contracted inventory at lower prices, driving up its potential profit margin in the coming months. Carrie Wheeler, OPEN CFO, said: We have prioritized our investments in our pricing capabilities across acquisition valuation, forecasting, and resale systems since our inception… We operate our business with entire discipline… We are rigorously back testing our models every day, they’re highly responsive, they have fast feedback loops, and we can react to changing market conditions. ( Seeking Alpha ) OPEN Reported Record-Breaking Revenues Of $4.2B In FY2021 YTD
OPEN Revenue, EBITDA & EBITDA Margin. Data source: S&P Capital IQ
Over the past four years, OPEN reported tremendous revenue growth at a CAGR of 58.15%. In FQ3’21, OPEN reported $2.26B of revenue, representing an impressive increase of 91% QoQ and 187% from FQ3’19 levels. In the same quarter, the company also reported an EBITDA margin of -2.6%, an improvement from -9.5% in FQ3’21 and -4.7% in FQ3’19. In the same quarter, OPEN reported a 7.5% contribution margin ( revenue after deduction of variable costs ), a slight decline from 10.8% in FQ2’21. Nonetheless, the company is confident in […]
source Blockbuster Growth Is Knocking At Opendoor Technologies
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